PG&E’s exit from bankruptcy now awaits decision from...

1of6A Black Bear Diner and nearby businesses burn as the Camp Fire destroys a large portion of Paradise in Butte County, Calif.. on Thursday, November 8, 2018. The wildfire claimed 85 lives and over 14,000 structures and left 50,000 homeless.Photo: Scott Strazzante / The Chronicle

2of6FILE - This Nov. 8, 2018, file photo shows a vintage car among debris after the Camp Fire tears through Paradise, Calif. California officials said Tuesday, Nov. 19, 2019, that crews have finished removing millions of tons of debris left by a Northern California wildfire that killed 85 people and virtually annihilated a town. The Camp Fire was the deadliest and most destructive wildfire in state history. (AP Photo/Noah Berger, File)Photo: Noah Berger, Associated Press

3of6PG&p; workers watch as trees are marked for cutting after the Camp Fire tore through the town of Paradise, California, on Wednesday, Nov. 14, 2018. PG&p; is trying to finalize deals with parties affected by its bankruptcy and its role in starting California wildfires.Photo: Gabrielle Lurie / The Chronicle

4of6The settlement must be approved by a Bankruptcy Court judge, but it must also meet with state approval.Photo: Gabrielle Lurie / The Chronicle 2018

5of6PG&p; crews working to clear downed power lines and telephone poles in Paradise, Calif. Saturday, Nov. 17, 2018 after the Camp Fire ripped through the entire town.Photo: Jessica Christian / The Chronicle

6of6Photo: Todd Trumbull

The fate of PG&E Corp.’s $13.5 billion deal to resolve wildfire claims as part of its bankruptcy case lies most immediately in the hands of Gov. Gavin Newsom.

By Friday, Newsom must decide if the agreement with victims’ attorneys PG&E announced one week earlier complies with a new state wildfire law he championed, according to terms the company disclosed Monday.

If the governor approves it, the PG&E parent company and subsidiary Pacific Gas and Electric Co. will be on track to clear the most central hurdle in their bankruptcy, though complications could still arise. If Newsom doesn’t sign off, PG&E’s agreement will automatically terminate — unless the company can amend it to his liking.

“The path for PG&E to get out of bankruptcy now runs through Gavin Newsom,” said Jared Ellias, a UC Hastings law professor who has followed the case. “He’s absolutely in charge. He didn’t want to own this bankruptcy, and now he does.”

The core financial aspects of the agreement are unlikely to change much, Ellias said, because attorneys have presented Newsom with “a very delicate bargain” that appears to reflect the best deal they think they could achieve for people affected by wildfires blamed on PG&E.

“There’s still some room, probably, for Gov. Newsom to make some changes around the edges if he wants to,” Ellias said. “But this is probably pretty close to what we’re going to see.”

Newsom has not yet made a decision about whether the agreement complies with AB1054, the state law he backed that creates a fund PG&E could tap to protect itself from future fire costs. In order to access the fund, PG&E has to resolve its bankruptcy by June 30.

“We’ve had the same objectives throughout this entire process,” said Newsom spokesman Nathan Click. “One, the utility has to be completely transformed, be accountable and, frankly, do a 180 on safety performance. Any deal has to treat victims fairly, and the utility that emerges has to be able to continue making progress toward the state’s clean-energy goals.”

PG&E revealed the $13.5 billion settlement deal Friday evening, a major milestone in the bankruptcy case that comes after the company had already agreed to provide $1 billion for a group of local governments and $11 billion to insurance companies that compensated many people whose homes were destroyed.

The company shed more light on the terms of the deal in a filing Monday with the Securities and Exchange Commission.

PG&E would establish a $13.5 billion trust to pay for claims arising from 2015, 2017 and 2018 wildfires and the 2016 Ghost Ship warehouse fire in Oakland, the filing says. The company would fund the trust initially with $5.4 billion in cash on the date that its court-approved plan to exit bankruptcy protection becomes effective. That would be succeeded by cash payments of $650 million in January 2021 and $750 million in January 2022, and the trust would also be awarded $6.75 billion in common stock of PG&E, according to the filing.

Individual victims would not be the only ones in line for the funds. The trust would also be used to pay wildfire claims against PG&E by federal and state government agencies involved in the wildfires, including the Federal Emergency Management Agency and the California Department of Forestry and Fire Protection, or Cal Fire.

In addition to Newsom, U.S. Bankruptcy Judge Dennis Montali, who is overseeing the PG&E case, must also sign off on the agreement. PG&E filed a motion for him to approve the deal on Monday, with a hearing planned for Dec. 17. The company is seeking his approval by Dec. 20, according to the securities filing.

The deal with victims, though pivotal to the cause and conclusion of the PG&E bankruptcy, does not remove all challenges from the case. For one thing, Montali had already allowed a group of bondholders to pursue their own plan to emerge from bankruptcy. The committee of fire victims is now supporting PG&E’s plan instead of the bondholders, but it’s not clear what will happen next. A representative for the bondholders had no comment Monday.

Also, PG&E said the agreement was reached between the company, its equity backers and fire victims’ attorneys. No “individual claimholder or government entity” such as FEMA or Cal Fire was involved, the filing said, noting that there “there can be no assurances” that those parties will support how the plan treats their claims.

Will Abrams, who lost his Santa Rosa home in the 2017 Tubbs Fire, said he was concerned after watching the legal and political process leading up to the settlement announcement. He fears that the deal is too focused on “dollars and cents” and “who gets what” at the expense of more structural concerns about safety. Abrams is pursuing a claim against PG&E and said he is now representing himself.

“In no way does this address the seriousness of the issues before us,” Abrams said. “This is penny-wise and pound-foolish to the extreme.”

But Patrick McCallum, who also lost a home in the Tubbs Fire and now runs a group that lobbies for fire victims, said he supports the deal. Regarding Newsom’s impending pivotal decision, McCallum said he believes “an agreement with wildfire victims has a lot of weight with this governor.”

The state will also shape the process as the California Public Utilities Commission reviews how the company should emerge from bankruptcy. Commissioners’ approval is required in order for PG&E’s bankruptcy exit plan to become effective.

McCallum said he hopes Montali and state officials look favorably on the victims’ deal “so we can get money out as quickly as possible to those wildfire victims desperately in need to make decisions about rebuilding or moving on with their lives.”

Going forward, PG&E will need to not only get court approval of the agreement with victims’ attorneys but will also seek approval of an amended version of its plan to resolve the bankruptcy case. PG&E also needs to file a disclosure statement that provides creditors with the financial information they need to vote on the plan, according to Ellias, the UC Hastings professor. Creditors also need time to vote, so the whole process could last several months, he said.

Regardless, the agreement with victims gets to the heart of why PG&E filed for bankruptcy protection in January, answering how the company plans to pay for victims of fires its power lines started, including the 2018 Camp Fire in Butte County.

It would also provide money for victims of the 2017 Tubbs Fire in the Santa Rosa area, which California investigators determined was not started by PG&E. Fire victims’ attorneys believed they could prove otherwise and Montali previously said he would allow them to bring several plaintiffs’ cases to a trial in San Francisco Superior Court. That trial is scheduled to start next month, but it will be unnecessary if the company’s deal with victims is approved.

PG&E has said it is not admitting fault for the Tubbs Fire or the Ghost Ship fire.

Additionally, U.S. District Judge James Donato on Monday put the brakes on his planned trial to estimate all of PG&E’s wildfire liabilities related to the bankruptcy case. An attorney for the committee of fire victims involved in the case asked Donato to do so in a Sunday letter submitted jointly with lawyers from PG&E and insurance companies. Donato stayed the proceedings until he issues another order on the matter and set a hearing for Dec. 17.

J.D. Morris is a business reporter covering PG&E and local efforts to develop coronavirus treatments or vaccines.

Before joining The Chronicle, he was the Sonoma County government reporter for the Santa Rosa Press Democrat, where he was among the journalists awarded a Pulitzer Prize for their coverage of the 2017 North Bay wildfires.

He was previously the casino industry reporter for the Las Vegas Sun. Raised in Monterey County and Bakersfield, he has a bachelor’s degree in rhetoric from UC Berkeley.